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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following section discusses management’s view of the financial condition, results of operations and cash flows of Diodes Incorporated and its subsidiaries (collectively, “the Company,” “our Company,” “we,” “our,” “ours,” or “us”) and should be read together with the consolidated financial statements and the notes to consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

The following discussion contains forward-looking statements and information relating to our Company. We generally identify forward-looking statements by the use of terminology such as “may,” “will,” “could,” “should,” “potential,” “continue,” “expect,” “intend,” “plan,” “estimate,” “anticipate,” “believe,” “project,” or similar phrases or the negatives of such terms. We base these statements on our beliefs as well as assumptions we made using information currently available to us. Such statements are subject to risks, uncertainties and assumptions, including those identified in Part I, Item 1A.“Risk Factors,” as well as other matters not yet known to us or not currently considered material by us. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. Given these risks and uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements. Forward-looking statements do not guarantee future performance and should not be considered as statements of fact.

You should not unduly rely on these forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. Unless required by law, we undertake no obligation to publicly update or revise any forward-looking statements to reflect new information or future events or otherwise. The Private Securities Litigation Reform Act of 1995 (the “Act”) provides certain “safe harbor” provisions for forward-looking statements. All forward-looking statements made in this Annual Report on Form 10-K are made pursuant to the Act.

A discussion of our results of operations for the year ended December 31, 2025 compared to December 31, 2024 is included below. For a discussion and comparison of the results of our operations for the year ended December 31, 2024 with the year ended December 31, 2023, refer to “Management's Discussion and Analysis of Financial Conditions and Results of Operations” in our Form 10-K for the year ended December 31, 2024 filed with the SEC on February 14, 2025.

General

Diodes Incorporated, together with its subsidiaries (collectively the “Company,” “we,” or “our” (Nasdaq: DIOD)), delivers high-quality semiconductor products to the world’s leading companies in the automotive, industrial, computing, consumer electronics, and communications markets. We leverage our expanded product portfolio of analog and power solutions combined with a flexible hybrid manufacturing model that meet customers’ needs. Our broad range of application-specific products, delivered through a total solutions sales approach and supported by global operations including engineering, testing, manufacturing, and customer service, enable us to be a premier provider for high-growth markets. For more information, visit www.diodes.com.

We operate from the following locations, with additional support offices throughout the world:

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Corporate Headquarters

Plano, Texas, United States

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Design, Engineering, and Marketing

Shanghai, Yangzhou, Shenzhen, and Hong Kong, China

Oldham, England

Greenock, Scotland

Bratislava, Slovakia

New Taipei City, Hsinchu, and Tainan, Taiwan

Milpitas, California, and Plano, Texas, United States

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Wafer Fabrication

Shanghai and Wuxi, China

Oldham, England

Greenock, Scotland

Hsinchu, Taiwan

South Portland, Maine, United States

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Assembly and Test

Shanghai, Chengdu, and Wuxi, China

Neuhaus am Rennweg, Germany

Chongli, Taiwan

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Sales, Warehouse, and Logistics

Hong Kong, Shanghai, Beijing, Shenzhen, Wuhan, Qingdao, and Xiamen, China

Oldham, England

Frankfurt and Munich, Germany

Milan, Italy

Tokyo, Japan

Singapore

Seongnam-si, South Korea

New Taipei City, Taiwan

Milpitas, California and Plano, Texas, United States

The Company’s manufacturing facilities have achieved certifications in the internationally recognized standards of ISO 9001:2015, ISO 14001:2015, and, for automotive products, IATF 16949:2016 and the Company is also C-TPAT certified. We believe these quality awards reflect the superior quality-control techniques established at the Company and further enhance our credibility as a vendor-of-choice to original equipment manufacturers (“OEMs”) increasingly concerned with quality and consistency.

Our market focus is on high-growth, end-user applications in the following areas:

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Automotive: connected driving, comfort/style/safety, electrification/powertrain;

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Industrial: embedded systems, industrial automation, medical, energy management, smart buildings;

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Computing: Artificial Intelligence (“AI”) data center including AI server, storage, and edge AI;

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Consumer: Internet of things (“IoT”): wearables, home automation, home appliances, and charging solutions, and

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Communications: smart phones, telecom, enterprise networking, smart infrastructure including space-based connectivity.

This discussion summarizes the significant factors affecting the consolidated operating results, financial condition, and liquidity of the Company for the twelve months ended December 31, 2025. This discussion should be read in conjunction with Item 8, the consolidated financial statements and the notes to consolidated financial statements.

Summary for the Twelve Months Ended December 31, 2025

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Net sales were $1.5 billion, an increase of 13.0% over the $1.3 billion in 2024;

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Gross profit was $462.4 million, a 6.1% increase from $435.9 million in 2024;

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Gross profit margin was 31.2% compared to 33.2% in 2024;

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Operating income decreased 29.7% to $35.5 million, or 2.4% of net sales, compared to $50.5 million, or 3.8% of net sales, in 2024;

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Net income was $66.1 million, an increase of 50.2% from the $44.0 million in 2024;

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Earnings per share was $1.43 per diluted share, a 50.5% increase from the $0.95 per diluted share in 2024;

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We achieved $215.5 million of cash flow from operations. We had cash capital expenditures of $78.4 million, or 5.3% of net sales. Net cash flow was $57.6 million, which includes the net pay-down of $1.2 million of total debt.

Summary for the Twelve Months Ended December 31, 2024

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Net sales were $1.3 billion, a decrease of 21.1% over the $1.7 billion in 2023;

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Gross profit was $435.9 million, a 33.8% decrease from $658.2 million in 2023;

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Gross profit margin declined to 33.2% compared to 39.6% in 2023;

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Operating income decreased 79.9% to $50.5 million, or 3.8% of net sales, compared to $250.6 million, or 15.1% of net sales, in 2023;

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Net income was $44.0 million, a decrease of 80.6% from the $227.2 million in 2023;

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Earnings per share was $0.95 per diluted share, a 80.6% decrease from the $4.9 per diluted share in 2023;

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We achieved $119.4 million of cash flow from operations. We had cash capital expenditures of $73.0 million, or 5.6% of net sales. Net cash flow was a negative $3.8 million, which includes the net pay-down of $7.6 million of total debt.

Business Outlook and Factors Relevant to Our Results of Operations

The Company ended 2025 with net sales growing 13% for the full year, which is the highest level of annual growth since 2021. Additionally, the fourth quarter of 2025 represented the fourth consecutive quarter of double-digit growth year-over-year, further highlighting the success of the Company’s design win initiatives and content expansion over the past year. The Company has continued to see demand improvements across all target markets and geographies, with the most significant growth for the full year driven by strength in the computing market for AI server-related applications as well as increases in our automotive and industrial end markets.

More recently, we have been strategically supporting key customers on new opportunities and orders specifically in the automotive and communications markets, while also further extending our design-in momentum across all end markets.

The success of our business depends on, among other factors, the strength of the global economy and the stability of the financial markets, our customers’ demand for our products, the ability of our customers to meet their payment obligations, customers not canceling or deferring existing orders, and the strength of consumers’ demand for items containing our products in the end-markets we serve. We believe the long-term outlook for our business remains generally favorable despite the uncertainties in the global economy as we continue to execute on the strategy that has proven successful for us over the years. See “Risk Factors – The success of our business depends on the strength of the global economy and the stability of the financial markets, and any weaknesses in these areas may have a material adverse effect on our net sales, operating results, and financial condition.” in Part I, Item 1A of this Annual Report for additional information.

Description of Sales and Expenses

Net sales

The principal factors that have affected or could affect our net sales from period to period are:

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The condition of the economy in general and of the semiconductor industry in particular;

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The continued hostilities between Ukraine and Russia, the conflict in the Middle East, and the resulting and continuing global impact;

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Political tension, including the implementation of tariffs, among and between the countries in which we do business;

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Our customers’ adjustments in their order levels;

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Changes in our pricing policies or the pricing policies of our competitors or suppliers;

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The addition or termination of key supplier relationships;

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The rate of introduction and acceptance by our customers of new products;

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Our ability to compete effectively with our current and future competitors;

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Our ability to enter into and renew key corporate and strategic relationships with our customers, vendors, and strategic alliances;

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Changes in foreign currency exchange rates;

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A major disruption of our information technology infrastructure;

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Unforeseen catastrophic events, such as pandemics, armed conflict, terrorism, fires, typhoons, and earthquakes;

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Any other disruptions, such as change in the political or governmental policies, labor shortages, unplanned maintenance, or other manufacturing problems; and

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Other risks, uncertainties, and assumptions identified in item 1A, “Risk Factors,” of this Annual Report and risks, uncertainties, and assumptions reflected in other documents we file with the SEC.

Cost of goods sold

Cost of goods sold includes manufacturing costs for our semiconductors and our wafers. These costs include raw materials used in our manufacturing processes as well as labor costs and overhead expenses. Cost of goods sold is also impacted by yield improvements, capacity utilization, and manufacturing efficiencies. In addition, cost of goods sold includes the cost of products that we purchase from other manufacturers and sell to our customers. Cost of goods sold is also affected by inventory obsolescence if our inventory management is not efficient.

Selling, general, and administrative

Selling, general, and administrative expenses relate primarily to compensation and associated expenses for personnel in general management, sales and marketing, information technology, engineering, human resources, procurement, planning and finance, and sales commissions, as well as outside legal, investor relations, accounting, consulting and other operating expenses. Also included in selling, general, and administrative expenses are acquisition costs from business combinations.

Research and development

Research and development expenses consist of compensation and associated costs of employees engaged in research and development projects, as well as materials and equipment used for new product development and technology qualification. Research and development expenses are executed on a global basis and are primarily associated with where the engineering talent is located, as well as the location of manufacturing sites participating in any required technology or process development. All research and development expenses are expensed as incurred.

Amortization of acquisition-related intangible assets

Amortization of acquisition-related intangible assets consists of assets such as developed technologies and customer relationships.

Interest income / expense

Interest income consists of interest earned on our cash and investment balances. Interest expense consists of interest payable on our outstanding credit facilities and other debt instruments.

Foreign currency (loss) gain, net

This income account is used to show the amount gained or lost as a result of foreign currency transactions.

Unrealized (loss) gain on investments

We hold investments in the form of common stock or some other similar equivalent accounted for under fair-value accounting. This account is used to show the necessary mark-to-market adjustments.

Income tax provision

Our global presence requires us to pay income taxes in a number of jurisdictions. See Note 12 of “Notes to Consolidated Financial Statements” for additional information.

Net income attributable to noncontrolling interest

This represents the minority investors’ share of our subsidiaries’ earnings.

Net income attributable to common stockholders

Net income attributable to common stockholders is net income less net income attributable to noncontrolling interest.

Results of Operations

The following table sets forth, for the periods indicated, the percentage that certain items in the statements of income bear to net sales:

Percent of Net Sales

Twelve Months Ended December 31,

Cost of goods sold (68.8 ) (66.8 )

Total operating expense (28.8 ) (29.4 )

Income from operations 2.4 3.9

Interest income 1.9 1.4

Interest expense (0.2 ) (0.2 )

Foreign currency loss, net (0.9 ) (0.5 )

Unrealized gain (loss) on investments 1.9 -

Impairment of equity investment (0.4 ) -

Gain on disposal of subsidiary 0.9 -

Other (expense) income (0.1 ) 0.2

Income before income taxes and noncontrolling interest 5.7 4.8

Income tax provision (1.0 ) (0.9 )

Net (income) attributable to noncontrolling interest (0.2 ) (0.5 )

Net income attributable to common stockholders 4.5 3.4

The following discussion explains in greater detail our consolidated operating results and financial condition. This discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this Annual Report (in thousands).

Twelve Months Ended December 31,

Impairment of equity investment (5,817 ) - 5,817 -

Net Sales

Our net sales increased approximately $171.0 million, or 13.0%, for the twelve months ended December 31, 2025, compared to the prior year, as we experienced stronger sales across all end markets. For the twelve months ended December 31, 2025, weighted-average sales price of the Company’s products decreased 1.7% and volumes increased 15.0% when compared to the prior year. The decline in weighted-average sales price was primarily due to product mix.

The table below sets forth our revenue as a percentage of product revenue by end-user market:

Twelve Months Ended December 31,

Gross profit

For the twelve months ended December 31, 2025, gross profit increased approximately 6.1% when compared to the prior year, reflective of the increased revenue in 2025. Gross profit margin for the twelve month periods ended December 31, 2025 and 2024, was 31.2% and 33.2%, respectively. The decrease in gross profit margin was primarily due to product mix and slower growth in the industrial end market. Average unit cost increased 1.3% for the twelve months ended December 31, 2025, compared to the same period last year, due to the mix of the product being on lower margin/lower cost products, as well as raw material price increases, including gold.

Operating expenses

Operating expenses for the twelve months ended December 31, 2025 increased approximately $41.6 million, or 10.8%, compared to the same period last year. Selling, general, and administrative expenses (“SG&A”) increased approximately $7.7 million or 3.3%, compared to the same period last year. The increase in SG&A was due to an increase in salaries and wages and freight and duty expense of approximately $18.3 million and $2.3 million respectively. The increase in salaries and wages in 2025 when compared to 2024 is partially related to a reversal of bonus accruals in 2024 for bonuses that were not paid. The increase was partially offset by lower selling expenses of approximately $6.0 million, lower bad debt expense of approximately $5.9 million, and lower professional services expenses of approximately $1.5 million, including audit, consulting, and legal expenses.

Research and development expenses (“R&D”) increased $28.1 million when compared to the same period last year. R&D, as a percentage of net sales, was 10.9% and 10.2% for the twelve-month periods ended December 31, 2025 and 2024, respectively. The increases in R&D expense are related to increases in wages and benefits of approximately $9.3 million, marketing expense of approximately $6.2 million, depreciation and amortization of approximately $5.3 million, and supplies expense of approximately $2.3 million. R&D is a priority of the company and new products and new technologies are a life blood, reflected in the increased spending, but staying relatively consistent as a percentage of net sales. Amortization of acquisition-related intangibles increased approximately 34.7% reflecting a full year of the increased amortization expense due to the acquisition of Fortemedia in October 2024.

Other (expense)/income

Interest income increased $10.0 million or 54.6% when compared to 2024 due to increased interest income received on derivative financial instruments. Interest expense was relatively flat from 2024 to 2025. The change in unrealized gain on investments in 2025 compared to 2024 was due to mark-to-market adjustments to adjust the value of the investments, including a $33.3 million increase in the value of the Company’s investment in Atlas. The Company recognized a gain of approximately $13.7 million related to the disposal of a subsidiary. During the the twelve months ended December 31, 2025, the Company recognized an impairment loss on an equity investment of $5.8 million, due to a decline in the value of the investment.

Income tax provision

We recognized income tax expense of approximately $14.8 million for the twelve months ended December 31, 2025, and income tax expense of approximately $11.8 million for the twelve months ended December 31, 2024, resulting in effective income tax rates of 17.6% and 18.9%, respectively. The decrease in the effective tax rate for 2025 compared to 2024 is primarily attributable to an increase in overall pre-tax book income and the impact of the geographical mix of pre-tax income. Our undistributed foreign earnings continue to be indefinitely reinvested in foreign operations, with limited exceptions related to earnings of European and Asian subsidiaries. Any future distributions of foreign earnings will not be subject to additional U.S. income tax but may be subject to foreign withholding taxes. The Company has recorded outside basis differences in the limited instances where they do not assert permanent reinvestment. As of December 31, 2025, our foreign subsidiaries held approximately $221.2 million of cash, cash equivalents, and investments, of which approximately $80.1 million would be subject to foreign withholding tax if distributed outside the country in which the related earnings were generated.

Financial Condition

Liquidity and Capital Resources

Our primary sources of liquidity are cash and cash equivalents, short-term investments, funds from operations, and, if necessary, borrowings under our credit facilities.

Liquidity requirements

Our primary liquidity requirements have been to meet our capital expenditure needs and to fund ongoing operations. For 2025 and 2024 our working capital was $878.6 million and $848.6 million, respectively. The Company’s working capital account balances reflect fluctuations from normal business activities. We expect cash generated by our operations together with existing cash, cash equivalents, short-term investments and available credit facilities to be sufficient to satisfy our working capital needs, capital asset purchases, outstanding commitments, and other liquidity requirements associated with our existing operations for at least the next 12 months.

The Company’s restricted cash primarily consisted of the cash required to be on deposit under contractual agreements with banks to support outstanding loan and import/export guarantees. As of December 31, 2025, restricted cash of $5.1 million was pledged as collateral for issuance of bank loans, bank acceptance notes, letters of credit, and funds held in escrow related to the Fortemedia acquisition.

Short-term investments

As of December 31, 2025, we had short-term investments of approximately $9.8 million. These investments are highly liquid with maturity dates greater than three months at the date of purchase. We generally can access these investments in a relatively short amount of time but in doing so we generally forfeit a portion of interest income.

Short-term debt

Our Asia subsidiaries maintain credit facilities with several financial institutions through our foreign entities worldwide totaling $150.3 million. Other than two Taiwanese credit facilities that are collateralized by assets, our foreign credit lines are unsecured, uncommitted and contain no restrictive covenants. These credit facilities bear interest at the Taipei Interbank Offered Rate (or similar indices) plus a specified margin. Interest payments are due monthly on outstanding amounts under the credit lines. The unused and available credit under the various facilities as of December 31, 2025, was approximately $119.6 million, net of $30.3 million advanced under our foreign credit lines and $0.4 million credit used for import and export guarantee.

Long-term debt

The Company maintains a long-term credit facility (“Credit Agreement”). The Credit Agreement consists of a Revolving Credit Facility in the amount of $225.0 million, including a swing line sublimit equal to the lesser of $50.0 million and the Revolving Credit Facility, a letter of credit sublimit equal to the lesser of $100.0 million and the Revolving Credit Facility, and an alternative currency sublimit equal to the lesser of $40.0 million and the Revolving Credit Facility. The Company has the option to increase the Revolving Credit Facility and/or incur Incremental Term Loans in an aggregate principal amount of up to $350.0 million. The Credit Agreement bears interest at Term Secured Overnight Financing Rate (“SOFR”) or similar other indices plus a specified margin and matures in May 2028. There was no outstanding balance under the Credit Agreement at December 31, 2025.

Because some of our outstanding debt is subject to variable interest rates, the recent rise in interest rates will potentially increase our overall debt service cost. If interest rates continue to rise globally, our cost of capital may increase in the future.

Capital expenditures and investments

In 2025 and 2024, our total cash capital expenditures were approximately $78.4 million and $73.0 million, respectively. Our capital expenditures for these periods were primarily related to manufacturing expansion in both our assembly/test and wafer fabrication facilities. Cash capital expenditures in 2025 were approximately 5.3% of our net sales, inline with the Company’s target model of 5% to 9% of net sales. Going forward, over the long term, the Company expects capital expenditures to continue to be within the 5% to 9% of net sales target model range.

Our foreign operations expose us to unique intellectual property technology and other risks compared to a company with fewer or no international operations. For example, we are exposed to potential cyber security breaches that may target our employees or infrastructure outside the United States. These risks may result in material and adverse impacts on our financial condition and results of operations. See “Risk Factors – Risks Related to Our International Operations” in Part I, Item 1A of this Annual Report for a more detailed summary of the intellectual property technology risks and other associated with our international business operations.

Discussion of Cash Flows

Cash and cash equivalents, including restricted cash, increased approximately $57.6 million to $372.3 million in 2025 from $314.7 million in 2024. The table below sets forth summary information from our statements of cash flows:

Twelve Months Ended December 31,

Net cash and cash equivalents from operating activities $ 215,513 $ 119,435

Net cash and cash equivalents from investing activities (116,178 ) (118,040 )

Net cash and cash equivalents from financing activities (54,811 ) (19,344 )

Effect of exchange rate changes on cash and cash equivalents 13,098 14,190

Operating Activities

Net cash flows from operating activities for 2025 was approximately $215.5 million, due primarily to $69.2 million of net income, $143.7 million in depreciation expense and amortization of intangible assets expense and $25.7 million from non-cash share-based compensation expense, and a net increase in cash attributable to changes in operating assets and liabilities of $36.5 million. These increases were partially offset by interest income from derivative financial instruments of $20.0 million, gain on disposal of property, plant and equipment of $0.6 million, non-cash gains on investments of $25.9 million, and a decrease in deferred income taxes of $7.5 million.

Investing Activities

Net cash flows from investing activities for 2025 was approximately $(116.2) million. The Company invested approximately $78.4 million in property, plant, and equipment, primarily at its production facilities in Asia. The Company made purchases of equity securities of $49.3 million, including making an investment in ATX of approximately $30.0 million, increasing its investment in Atlas by approximately $17.3 million, and the acquisition of the minority interest in a joint venture in Taiwan for approximately $4.1 million, bringing the Company’s ownership to 100%. The Company also paid approximately $4.0 million, net, due to the expiration of a hedge instrument. These uses of cash for investing were partially offset by the receipt of approximately $16.0 million related to the sale of TF Semiconductor Solutions, Inc.

Financing Activities

Net cash flows from financing activities for 2025 was approximately $(54.8) million, due primarily to repurchases of our common stock of $33.8 million, net changes in noncontrolling interests of $18.1 million, taxes on net share settlements of $4.3 million, and the net reduction in our outstanding indebtedness of $1.2 million.

Contractual Obligations

Our estimated future obligations consist of debt, interest on long-term debt, leases, defined benefit obligation and purchase obligations. See Note 8–“Bank Credit Agreements and Other Short-term and Long-term Debt, Note 9–“Leases”, Note 13– “Employee Benefit Plans”, and Note 17–“Commitments and Contingencies” of the notes to consolidated financial statements” included elsewhere in this Annual Report for additional information.

We cannot make reasonable estimates of the amount and period in which our tax liabilities will be paid. See “Accounting for income taxes” below and Note 12 of “Notes to Consolidated Financial Statements” of this Annual Report for additional information.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with generally accepted principles in the United States of America (“U.S. GAAP”) requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, which are based upon historical experiences, market trends, and financial forecasts and projections, and upon various assumptions that management believes to be reasonable under the circumstances at that certain point in time. Actual results may differ, significantly at times, from these estimates under different assumptions or conditions.

We believe the following critical accounting policies and estimates affect the significant estimates and judgments we use in the preparation of our consolidated financial statements, and may involve a higher degree of judgment and complexity than others.

Revenue recognition

In relation to our revenue recognition, we record estimated allowances/reserves for the following items;

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Ship and debit reserves, which arise when we, from time to time based on market conditions, issue credit to certain distributors upon their shipments to their end customers;

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Stock rotation reserves, which are contractual obligations that permit certain distributors, up to four times a year, to return a portion of their inventory based on historical shipments to them in exchange for an equal and offsetting order;

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Price protection reserves, which arise when market conditions cause average selling prices to decrease and we issue credit to certain distributors on their inventory;

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Accounts receivable reserves related to our customer’s ability to pay; and

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Product returns, distributor price adjustments, and other allowances.

Our reserve estimates are based upon historical data as well as projections of sales, distributor inventories, price adjustments, average selling prices, and market conditions. Actual returns and adjustments could be significantly different from our estimates and provisions, resulting in an adjustment to net sales. Based on the allowance/reserve balance as of December 31, 2025, a 1% change would increase or decrease the estimated allowance/reserve and net revenue by approximately $1.0 million.

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined principally by the first-in, first-out method. On an ongoing basis, we evaluate our inventory for salability, obsolescence and any other available applicable information. If our review indicates a reduction in utility below carrying value, we reduce our inventory to a new cost basis. If future demand or market conditions are different than our current estimates, an inventory adjustment may be required, and would be reflected in cost of goods sold in the period the revision is made.

Accounting for income taxes

As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the tax jurisdictions in which we operate. This process involves using an asset and liability approach whereby deferred tax assets and liabilities are recorded for differences in the financial reporting bases and tax bases of our assets and liabilities. A valuation allowance is provided against deferred tax assets unless it is more likely than not that such deferred tax assets will be realized. This analysis requires considerable judgment and is subject to change to reflect future events and changes in the tax laws.

The benefit of a tax position is recognized only if it is more likely than not that the tax position would be sustained based on its technical merits in a tax examination, using the presumption the tax authority has full knowledge of all relevant facts regarding the position. The amount of benefit recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on ultimate settlement with the tax authority. For tax positions not meeting the more likely than not test, no tax benefit is recorded.

Business Combinations

Significant judgment is often required in estimating the fair value of assets acquired and liabilities assumed. The Company makes estimates and assumptions about conditions of the assets, other costs not captured in the base costs, and consideration for entrepreneurial profit, depreciation, functional obsolescence, and economic obsolescence allocated to the various property, plant, and equipment categories considering the perspective of marketplace participants.

Recently Issued Accounting Pronouncements

See Note 1 of “Notes to Consolidated Financial Statements” of this Annual Report for additional information regarding the status of recently issued accounting pronouncements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Foreign Currency Risk

We face exposure to adverse movements in foreign currency exchange rates, primarily in Asia and Europe. Our foreign currency risk may change over time as the level of activity in foreign markets grows and could have a material adverse impact upon our financial results. Certain of our assets, including certain bank accounts and accounts receivable, and liabilities exist in non–U.S. dollar denominated currencies, which are sensitive to foreign currency exchange fluctuations. These currencies are principally the Chinese Yuan, the Taiwanese dollar, the Euro, and the British Pound Sterling and, to a lesser extent, the Japanese Yen and the Hong Kong dollar. We have entered into hedging arrangements designed to mitigate foreign currency fluctuations. See “Risk Factors – We are subject to foreign currency risk as a result of our international operations.”in Part I, Item 1A of this Annual Report for additional information.

Foreign Currency Transaction Risk

We are subject to foreign currency risk arising from intercompany transactions that are expected to be settled in cash in the near term where the cash balances are held in denominations other than our subsidiaries’ functional currency. If exchange rates weaken against the functional currency, we would incur a remeasurement gain in the value of the cash balances, and if the exchange rates strengthen against the functional currency, we would incur a remeasurement loss in the value of the cash balances, assuming the net monetary asset balances remained constant. Our ultimate realized gain or loss with respect to currency fluctuations will generally depend on the size and type of transaction, the size and currencies of the net monetary assets and the changes in the exchange rates associated with these currencies. Based on balances at December 31, 2025, if the Chinese Yuan, the Taiwanese dollar, the Euro, and the British Pound Sterling were to weaken (or strengthen) by 1.0% against the U.S. dollar, we would experience currency transaction gain (or loss) of approximately $3.5 million (partially offset by any foreign currency hedges). Net foreign exchange transaction gains (or losses) are included in other income and expense.

Foreign Currency Translation Risk

For our subsidiaries that maintain their books in a foreign currency, fluctuations in that foreign currency will impact the amount of total assets and liabilities that we report for our foreign subsidiaries upon the translation of these amounts into U.S. dollars. All elements of the subsidiaries’ financial statements, except for stockholders’ equity accounts, are translated using a currency exchange rate. Assets and liabilities denominated in foreign currencies are translated at the exchange rate on the balance sheet date. Income and expense accounts denominated in foreign currencies are translated at the weighted-average exchange rate during the period presented. Resulting translation adjustments are recorded as a separate component of accumulated other comprehensive income or loss within stockholders’ equity in the consolidated balance sheets, which are accumulated in this account until sale or liquidation of the foreign entity investment, at which time they are reported as adjustments to the gain or loss on sale of investment.

Foreign Currency Denominated Defined Benefit Plans

We have a contributory defined benefit plan that covers certain employees in the U.K., which is closed to new entrants and frozen with respect to future benefit accruals. The retirement benefit is based on the final average compensation and service of each eligible employee. December 31 is our annual measurement date, and on the measurement date, defined benefit plan assets are determined based on fair value. Defined benefit plan assets consist primarily of high quality corporate bonds and stocks that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension liability. The net pension and supplemental retirement benefit obligations and the related periodic costs are based on, among other things, assumptions of the discount rate, estimated return on plan assets and mortality rates. These obligations and related periodic costs are measured using actuarial techniques and assumptions. The projected unit credit method is the actuarial cost method used to compute the pension liabilities and related expenses.

As of December 31, 2025, the plan was underfunded and a liability of approximately $1.2 million was reflected in our consolidated financial statements as a noncurrent liability. The amount recognized in accumulated other comprehensive income was a net loss of $33.4 million. If the British Pound Sterling were to (weaken) or strengthen by 1.0% against the U.S. dollar, we would experience currency translation liability (decrease) or increase by approximately $0.2 million. The weighted-average discount rate assumption used to determine benefit obligations as of December 31, 2025, was 5.5%%. A 0.2% increase/(decrease) in the discount rate used to calculate the net period benefit cost for the year would reduce/increase annual benefit cost by approximately $0.2 million. A 0.2% increase/(decrease) in the discount rate used to calculate the year-end projected benefit obligation would (decrease)increase the year end projected benefit obligation by approximately $1.9 million. The expected return on plan assets is determined based on historical and expected future returns of the various assets classes and as such, each 1.0% increase/(decrease) in the expected rate of return assumption would increase/(decrease) the net-period benefit cost by approximately $0.9 million. The asset value of the defined benefit plan has been volatile in recent years due primarily to wide fluctuations in the U.K. equity markets and bond markets. See “Risk Factors – Changes in actuarial assumptions for our defined benefit plan could increase the volatility of the plan’s asset value, require us to increase cash contributions to the plan and have a negative impact on our cash flows, operating results and financial condition” in Part I, Item 1A of this Annual Report for additional information.

Interest Rate Risk

We have credit facilities with financial institutions in the U.S., Asia, and Europe as well as other debt instruments with interest rates equal to SOFR or similar indices plus a negotiated margin. A rise in interest rates could have an adverse impact upon our cost of working capital and our interest expense. As of December 31, 2025, our outstanding principal long-term debt was $25.7 and outstanding short-term debt was $30.3 million. Based on our debt balances at December 31, 2025, an increase or decrease in interest rates by 1.0% for the year on our credit facilities would increase or decrease our annual interest rate expense by approximately $0.6 million, net of the amounts realized from our interest rate swaps. See “Risk Factors, – We are subject to interest rate risk that could have an adverse effect on our cost of working capital and interest expenses, which could adversely affect our business, operating results, and financial condition”in Part I, Item 1A of this Annual Report for additional information.

Political Risk

We have a significant portion of our assets in mainland China, Taiwan, and the U.K. The possibility of political conflict between any of these countries or with the U.S. could have a material adverse impact upon our ability to transact business through these important business channels and to generate profits. See “Risk Factors – Risks Related to our International Operations”in Part I, Item 1A of this Annual Report for additional information.

Inflation Risk

Inflation did not have a material effect on net sales or net income in fiscal year 2025. A significant increase in inflation could affect future performance.

Credit Risk

Thesuccess of our business depends, among other factors, on the strength of the global economy and the stability of the financial markets, which in turn affect our customers’ demand for our products, the ability of our customers to meet their payment obligations, the likelihood of customers canceling or deferring existing orders and the strength of consumer demand for items containing our products in the end-markets we serve. We provide credit to customers in the ordinary course of business and perform ongoing credit evaluations, while at times providing extended terms. We believe that our exposure to concentrations of credit risk with respect to trade receivables is largely mitigated by dispersion of our customers over various geographic areas, operating primarily in electronics manufacturing and distribution. We believe our allowance for doubtful accounts is sufficient to cover customer credit risks.

Item 8. Financial Statements and Supplementary Data.

See Part IV, Item 15 “Exhibits and Financial Statement Schedules” for our consolidated financial statements and the notes and schedules thereto filed as part of this Annual Report.

Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.

Not Applicable.

Item 9A. Controls and Procedures.

Disclosure Controls and Procedures

Our Chief Executive Officer, Gary Yu, and Chief Financial Officer, Brett R. Whitmire, with the participation of our management, carried out an evaluation as of December 31, 2025, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended). Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer believe that, as of the end of the period covered by this report, our disclosure controls and procedures are effective at the reasonable assurance level to ensure that information required to be included in this report is:

•

recorded, processed, summarized, and reported within the time period specified in the Commission’s rules and forms and

•

accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding disclosure.

Disclosure controls and procedures, no matter how well designed and implemented, can provide only reasonable assurance of achieving an entity’s disclosure objectives. The likelihood of achieving such objectives is affected by limitations inherent in disclosure controls and procedures. These include the fact that human judgment in decision-making can be faulty and that breakdowns in internal control can occur because of human failures such as simple errors, mistakes, or intentional circumvention of the established processes.

Management’s Annual Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and implemented by our Board of Directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP.

Our internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures of ours are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of management, including our Chief Executive Officer and the Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework and criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). This evaluation included review of the documentation of controls, testing of operating effectiveness of controls, and a conclusion on this evaluation.

Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2025.

The effectiveness of our internal control over financial reporting as of December 31, 2025, has been audited by Baker Tilly US, LLP, an independent registered public accounting firm, as stated in their report which appears in Item 8 of this Annual Report on Form 10-K.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting, known to the Chief Executive Officer or the Chief Financial Officer, that occurred during the last fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

None.

Insider Trading Arrangements

None

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

PART III

Item 10. Directors, Executive Officers, and Corporate Governance.

The information concerning our directors, executive officers, and corporate governance is incorporated herein by reference from the section entitled “Proposal One – Election of Directors” contained in our definitive proxy statement to be filed pursuant to Section 14(a) of the Securities Exchange Act of 1934 within 120 days after our fiscal year end of December 31, 2025, for our annual stockholders’ meeting for 2026 (the “Proxy Statement”).

We have adopted a code of ethics that applies to our Chief Executive Officer and senior financial officers. The code of ethics has been posted on our website under the Corporate Governance portion of the Investor Relations section at www.diodes.com. We intend to satisfy disclosure requirements regarding amendments to, or waivers from, any provisions of our code of ethics on our website.

Item 11. Executive Compensation.

The information concerning executive compensation is incorporated herein by reference from the sections entitled “Compensation Discussion and Analysis,” “Executive Compensation,” and “Compensation Committee Interlocks and Insider Participation” contained in the Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information concerning the security ownership of certain beneficial owners and management and related stockholder matters is incorporated herein by reference from the sections entitled “General Information – Security Ownership of Certain Beneficial Owners and Management” and “Executive Compensation – Equity Compensation Plan Information” contained in the Proxy Statement.

Item 13. Certain Relationships, Related Transactions, and Director Independence.

The information concerning certain relationships, related transactions and director independence is incorporated herein by reference from the sections entitled “Corporate Governance – Certain Relationships and Related Person Transactions,” “Corporate Governance – Director Independence,” and “Proposal One – Election of Directors” contained in the Proxy Statement.

Item 14. Principal Accountant Fees and Services.

The information concerning our principal accountant’s fees and services is incorporated herein by reference from the section entitled “Ratification of the Appointment of Independent Registered Public Accounting Firm” contained in the Proxy Statement.

The Company’s independent registered accounting firm is Baker Tilly US, LLP, Irvine, California. PCAOB ID: 23.

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a) Financial Statements and Schedules

Our consolidated financial statements are as set forth under Item 8 of this Annual Report on Form 10-K.

(1) Financial statements: Page

Report of Independent Registered Public Accounting Firm 45

Consolidated Balance Sheets at December 31, 2025, and 2024 48

Notes to Consolidated Financial Statements 54

(2) Schedules:

None

Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements and notes thereto.

(b) Exhibits

The exhibits listed on the Index to Exhibits are filed as exhibits or incorporated by reference to this Annual Report.

Not Applicable.

Item 16. Form 10-K Summary.

None

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of

Diodes Incorporated

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Diodes Incorporated (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended December 31 2025, and the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2025 and 2024, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013)issued by COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting included in Item 9A. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and

procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue – Ship and Debit Reserve

As described in Note 1, the Company records reserves related to estimated customer incentives, such as “ship and debit”, which arise when the Company, from time to time based on market conditions, issues credits to certain distributors upon shipments to end customers. The ship and debit reserve comprehends both claims in process and anticipated claims arising from the eventual sale of distributor inventory that is subject to claim activity. The Company performs a look-back analysis of revenues and credits issued to distributors. Using the look-back analysis, the Company adjusts assumptions and estimated reserves each quarter. The resulting ship and debit reserve is recorded within the $255.6 million reduction to 2025 net sales with a corresponding reduction to accounts receivable.

Estimating the ship and debit reserve involves the application of models which require management to make certain assumptions including historical customer ship and debit credit rates and credit lag times on such revenues. These assumptions could be affected by current and future economic and market conditions. We identified the ship and debit reserve as a critical audit matter because auditing management’s estimate of the ship and debit reserve was complex and judgmental due to significant estimation required by management.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included evaluating the design and testing the operating effectiveness of internal controls related to the Company’s ship and debit reserve, including testing management’s review of the reserve calculation and the underlying assumption used to develop the estimate. Our audit procedures related to the identification and testing of significant assumptions used in the estimate included the following, among others:

•

Testing management’s process to develop the estimate for the ship and debit reserve, including:

Evaluating the reasonableness of management’s assumptions by comparing the significant assumptions (ship and debit claims percentages history and the relevant cycle time period between when sales are made by distributors to their end customers and when ship and debit credit memos are issued by the Company to distributors) used to historical trends, including testing the completeness and accuracy of the underlying data.

Vouching revenues and ship and debit credits to supporting documentation.

Confirming point of sales data used within management’s reserve calculation with a sample of distributors to validate data fields.

Performing sensitivity analyses on the significant assumptions (ship and debit claims percentage history and the relevant cycle time period between when sales are made by distributors to their end customers and when ship and debit credit memos are issued by the Company to distributors) to evaluate the potential changes in the ship and debit reserve that would result from changes in the assumptions.

/s/ Baker Tilly US, LLP

Irvine, California

February 10, 2026

We have served as the Company’s auditor since 1993.

DIODES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

December 31,

Assets

Current assets:

Liabilities

Current liabilities:

Current portion of long-term debt 1,442 1,096

Long-term debt, net of current portion 24,224 19,563

Commitments and contingencies (See Note 17)

Stockholders' equity

The accompanying notes are an integral part of these consolidated financial statements.

DIODES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

Twelve Months Ended December 31,

Operating expenses

Loss (gain) on disposal of fixed assets 572 (7,641 ) (2,045 )

Other operating income - (1 ) (16 )

Other (expense) income

Impairment of equity investment (5,817 ) - -

Gain on disposal of subsidiary 13,730 - -

Earnings per share attributable to common stockholders:

Number of shares used in earnings per share computation:

The accompanying notes are an integral part of these consolidated financial statements.

DIODES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

Twelve Months Ended December 31,

Unrealized gain (loss) on defined benefit plan, net of tax 6,609 5,988 (1,466 )

Unrealized (loss) gain on swaps and collars, net of tax (7,240 ) 2,388 (13,619 )

Unrealized foreign currency gain (loss), net of tax 36,608 (11,873 ) 91

The accompanying notes are an integral part of these consolidated financial statements.

DIODES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(In thousands)

Shares Amount Shares Amount capital earnings loss equity interest equity

Net changes in noncontrolling interests - - - - - - - (3,804 ) (3,804 )

Common stock issued for share-based plans 474 316 - - (316 ) - - - - -

Deferred compensation plan - - (5 ) (496 ) 496 - - - - -

Tax related to net share settlement - - - - (15,637 ) - - (15,637 ) - (15,637 )

Net changes in noncontrolling interests - - - - 853 - - 853 (2,108 ) (1,255 )

Common stock issued for share-based plans 396 264 - - (264 ) - - - - -

Deferred compensation plan - - (1 ) (114 ) 114 - - - - -

Tax related to net share settlement - - - - (9,561 ) - - (9,561 ) - (9,561 )

Common stock issued for share-based plans 263 176 - - (176 ) - - - - -

Tax related to net share settlement - - - - (4,339 ) - - (4,339 ) - (4,339 )

The accompanying notes are an integral part of these consolidated financial statements.

DIODES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Twelve Months Ended December 31,

Cash flows from operating activities

Gain on sale of subsidiary (13,730 ) - -

Impairment of long-lived assets 5,816 - -

Changes in operating assets:

Changes in operating liabilities:

Change in income tax (refundable) payable (7,478 ) 12,408 (9,307 )

Change in unrealized tax benefit liability (1,422 ) (15,312 ) 2,942

Change in other operating liabilities 1,122 (4,260 ) (1,779 )

Cash flows from investing activities

Acquisitions, net of cash received (5,310 ) (56,661 ) (3 )

Proceeds from sale of property, plant, and equipment 6,991 816 2,769

Purchases of equity securities (49,303 ) - (17,901 )

Proceeds from sale of subsidiary 15,958 - -

Receipt of insurance recovery - 4,725 1,413

Proceeds from disposal of wafer fabrication facility - - 6,292

Net amounts (paid) received for hedge termination (4,000 ) - 374

Cash flows from financing activities

Repayments of lines of credit and short-term debt (61,922 ) (98,354 ) (24,509 )

Debt issuance costs - (188 ) (948 )

Repayment of and proceeds from finance lease obligation (85 ) (64 ) (115 )

Taxes paid related to net share settlement (4,339 ) (9,561 ) (15,637 )

Net changes in noncontrolling interests (18,104 ) (2,079 ) (3,647 )

Repurchases of common stock (33,814 ) - -

The accompanying notes are an integral part of these consolidated financial statements.

DIODES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In thousands)

Twelve Months Ended December 31,

Supplemental Cash Flow Information

Non-cash investing and financing activities:

Dividend payable balance to noncontrolling interests $ - $ - $ 100

The accompanying notes are an integral part of these consolidated financial statements.

DIODES INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands except per share data)

Note 1 – Summary of Operations and Significant Accounting Policies

Nature of operations

GENERAL

Diodes Incorporated, together with its subsidiaries (collectively the “Company,” “we,” or “our” (Nasdaq: DIOD)), a Standard and Poor’s Smallcap 600 and Russell 3000 Index company, is a leading global manufacturer and supplier of high-quality application-specific standard products within the broad discrete, logic, analog, and mixed-signal semiconductor markets. The Company serves the industrial, automotive, computing, consumer, and communications markets.

The Company’s diverse product portfolio covers diodes; rectifiers; transistors; MOSFETs; SiC diodes and MOSFETs; protection devices; logic; voltage translators; amplifiers and comparators; sensors; and power management devices such as AC-DC converters, digital isolators and isolated gate drivers, DC-DC switching, photocoupler, linear voltage regulators, voltage references, LED drivers, power switches, and voltage supervisors. We also have timing and connectivity solutions including clock ICs, crystal oscillators, PCIe packet switches, multi-protocol switches, interface products, and signal integrity solutions for high-speed signals.

The Company operates form the following locations, with additional support offices throughout the world:

•

Corporate Headquarters

Plano, Texas, United States

•

Design, Engineering, and Marketing

Shanghai, Yangzhou, Shenzhen, and Hong Kong, China

Oldham, England

New Taipei City, Hsinchu, and Tainan, Taiwan

Milpitas, California, and Plano, Texas, United States

•

Wafer Fabrication

Shanghai and Wuxi, China

Oldham, England

Greenock, Scotland

Hsinchu, Taiwan

South Portland, Maine, United States

•

Assembly and Test

Shanghai, Chengdu, and Wuxi, China

Neuhaus am Rennweg, Germany

Chongli, Taiwan

•

Sales, Warehouse, and Logistics

Hong Kong, Shanghai, Beijing, Shenzhen, Wuhan, Guangzhou, Qingdao, and Xiamen, China

Oldham, England

Frankfurt and Munich, Germany

Milan, Italy

Tokyo, Japan

Singapore

Seongnam-si, South Korea

New Taipei City, Taiwan

Milpitas, California and Plano, Texas, United States

Our market focus is on high-growth, end-user applications in the following areas:

•

Automotive: connected driving, comfort/style/safety, electrification/powertrain;

•

Industrial: embedded systems, industrial automation, medical, energy management, smart buildings;

•

Computing: Artificial Intelligence (“AI”) data center including AI server, storage, and edge AI;

•

Consumer: Internet of things (“IoT”): wearables, home automation, home appliances, and charging solutions, and

•

Communications: smart phones, telecom, enterprise networking, smart infrastructure including space-based connectivity.

Significant Accounting Policies

Principles of consolidation – The consolidated financial statements include the accounts of Diodes Incorporated, its wholly-owned subsidiaries and its controlled majority-owned subsidiaries. We account for equity investments in companies over which we have the ability to exercise significant influence, but do not hold a controlling interest, under the equity method, and we record our proportionate share of income or losses in Interest and other, net in the consolidated statements of income. All significant intercompany balances and transactions have been eliminated.

Use of estimates – The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“GAAP”) requires that management make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The level of uncertainty in estimates and assumptions increases with the length of time until the underlying transactions are completed. Actual results may differ from these estimates in amounts that may be material to the consolidated financial statements and accompanying notes.

Revenue recognition– The Company generates revenue from sales of its semiconductor products to direct customers and distributors and recognizes revenue when control is transferred. This transfer generally occurs at a point in time upon shipment or delivery to the customer or distributor, depending upon the terms of the sales order. The payment terms on our sales are based on negotiations with our customers. For sales to distributors, payment is not contingent upon resale of the products. The vast majority of our revenue from products and services is accounted for at a point in time.

Our customers can order different types of semiconductors in a single contract (purchase order), and each line on a purchase order represents a separate performance obligation. Depending on the terms of an arrangement, we may also be responsible for shipping and handling activities. We have elected to account for shipping and handling as activities to fulfill our promise to transfer the good(s). As such, shipping and handling activities do not represent a separate performance obligation, and are accrued as a fulfillment cost. Further, although we offer warranties on our products, our warranties are considered to be assurance-type in nature and do not cover anything beyond ensuring that the product is functioning as intended. Based on the guidance in ASC 606, assurance-type warranties do not represent separate performance obligations; therefore, the primary performance obligation in the majority of our contracts is the delivery of a specific good through the purchase order submitted by our customer.

We record allowances/reserves for a number of items. The following items are the largest dollar items for which we record allowances/reserves, with ship and debit making up the vast majority: (i) ship and debit, which arise when we issue credit to certain distributors upon their shipments to their end customers; (ii) stock rotation, which are contractual obligations that permit certain distributors, up to four times a year, to return a portion of their inventory based on historical shipments to them in exchange for an equal and offsetting order; and (iii) price protection, which arise when market conditions cause average selling prices to decrease and we issue credit to certain distributors on their inventory. Ship and debit reserves are recorded as a reduction to net sales with a corresponding reduction to accounts receivable. Stock rotation reserves and price protection reserves are recorded as a reduction to net sales with a corresponding increase in accrued liabilities.

We also assess our customer’s ability and intention to pay, which is based on a variety of factors including our customer’s historical payment experience, their financial condition and the condition of the global economy and financial markets. Payment terms and conditions typically vary depending on negotiations with the customer.

Net sales are reduced in the period of sale for estimates of product returns and other allowances including distributor adjustments, which were approximately $331.0 million, $346.8 million, and $262.8 million in 2025, 2024, and 2023, respectively.

Product warranty – We generally warrant our products for a period of one year from the date of sale. Historically, warranty expense has not been material.

Cash, cash equivalents, and short-term investments – We consider all highly liquid investments with maturity of three months or less at the date of purchase to be cash equivalents. We currently maintain substantially all of our day-to-day operating cash balances with major financial institutions. We hold short-term investments consisting of time deposits, which are highly liquid with maturity dates greater than three months at the date of purchase. Generally, we can access these investments in a relatively short amount of time but in doing so we generally forfeit a portion of interest income. See Note 3 below for additional information regarding fair value of financial instruments.

Allowance for doubtful accounts – We evaluate the collectability of our accounts receivable based upon a combination of factors, including the current business environment and historical experience. If we are aware of a customer’s inability to meet its financial obligations, we record an allowance to reduce the receivable to the amount we reasonably believe will be collected from the customer. For all other customers, we record an allowance based upon the amount of time the receivables are past due. If actual accounts receivable collections differ from these estimates, an adjustment to the allowance may be necessary with a resulting effect on operating expense. Accounts receivable are presented net of valuation allowance, which were approximately $4.1 million at December 31, 2025 and $7.8 million at December 31, 2024.

Inventories – Inventories are stated at the lower of cost or net realizable value. Cost is determined principally by the first-in, first-out method. Cost includes materials, labor, and manufacturing overhead related to the purchase and production of inventories. Any write-down of inventory to the lower of cost or net realizable value at the close of a fiscal period creates a new cost basis that subsequently would not be marked up based on changes in underlying facts and circumstances. On an on-going basis, we evaluate inventory for obsolescence and slow-moving items. This evaluation includes analysis of sales levels, sales projections, purchases by item, shelf life, and raw material usage related to our manufacturing facilities. If our review indicates a reduction in utility below carrying value, we reduce inventory to a new cost basis. If future demand or market conditions are different from our current estimates, an inventory adjustment to write down inventory may be required, and would be reflected in cost of goods sold in the period the revision is made.

Property, plant, and equipment – Purchased property, plant, and equipment is recorded at historical cost, and property, plant, and equipment acquired in a business combination is recorded at fair value on the date of acquisition. Property, plant and equipment is depreciated using straight-line methods over the estimated useful lives, which range from 20 to 55 years for buildings and 3 to 10 years for machinery and equipment. The estimated lives of leasehold improvements range from 3 to 5 years, and are amortized over the shorter of the remaining lease term or their estimated useful lives.

Leases – The Company determines if an arrangement is a lease at its inception. Operating and financing lease arrangements are comprised primarily of real estate and equipment agreements for which the right-of-use (“ROU”) assets are included in other assets and the corresponding lease liabilities, depending on their maturity, are included in Accrued liabilities and other current or Other long-term liabilities in the Consolidated Balance Sheet.

ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The lease term includes options to extend the lease when it is reasonably certain that the option will be exercised. Leases with a term of 12 months or less are not recorded on the Consolidated Balance Sheet.

The Company uses its estimated incremental borrowing rate in determining the present value of lease payments considering the term of the lease, which is derived from information available at the lease commencement date, giving consideration to publicly available data for instruments with similar characteristics. The Company accounts for the lease and non-lease components as a single lease component.

Segment reporting – The Company’s operations are managed and reported on a consolidated basis to our President and CEO who is also our CODM. For financial reporting purposes, we operate in a single segment, standard semiconductor products, through our various design, manufacturing, and distribution facilities, which reflects the way in which our CODM executes operating decisions, allocates resources, and manages the growth and profitability of the Company. We sell product primarily through our operations in Asia, the Americas, and Europe. See Note 16 of “Notes to Consolidated Financial Statements” of this Annual Report for additional information.

Goodwill and other indefinite lived intangible assets – Goodwill and indefinite lived assets are tested for impairment on an annual basis or when an event or changes in circumstances indicate that its carrying value may not be recoverable. Goodwill impairment is tested at the reporting unit level, which is defined as an operating segment or one level below the operating segment. Diodes has one operating segment. No goodwill impairment occurred in 2025, 2024, or 2023. Goodwill is reviewed for impairment using either a qualitative assessment or a quantitative goodwill impairment test. If we choose to perform a qualitative assessment and determine the fair value more likely than not exceeds the carrying value, no further evaluation is necessary. When we perform the quantitative goodwill impairment test, we compare fair value to carrying value, which includes goodwill. If fair value exceeds carrying value, the goodwill is not considered impaired. If the carrying value is higher than the fair value, the difference would be recognized as an impairment loss.

Impairment of long-lived assets – Our long-lived assets are reviewed whenever events or changes in circumstances indicate that the carrying value may not be recoverable. We consider assets to be impaired if the carrying value exceeds the undiscounted projected cash flows from operations. If impairment exists, the assets are written down to fair value or to the projected discounted cash flows from related operations. As of December 31, 2025, we expect the remaining carrying value of assets to be recoverable.

Business combinations – We account for acquired businesses using the acquisition method of accounting, which requires that once control of a business is obtained, 100% of the assets acquired and liabilities assumed, including amounts attributed to noncontrolling interests, be recorded at the date of acquisition at their respective fair values. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.

For significant acquisitions we may use independent third-party valuation specialists to assist us in determining the fair value of assets acquired and liabilities assumed.

While management believes those expectations and assumptions are reasonable, they are inherently uncertain. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions, which could result in subsequent impairments.

During the normal course of business the Company pursues acquisitions. See Note 20 for additional information regarding business acquisitions.

Equity investments – We regularly invest in equity securities of public and private companies to promote business and strategic objectives. Equity investments are measured and recorded as follows:

Marketable equity securities are equity securities with readily determinable fair value (“RDFV”) that are measured and recorded at fair value on a recurring basis with changes in fair value, whether realized or unrealized, recorded through the income statement.

Non-marketable equity securities are equity securities without RDFV that are measured and recorded using a measurement alternative that measures the security at cost minus impairment, if any, plus or minus changes resulting from qualifying observable price changes.

Equity-method investments are equity securities in investees we do not control but over which we have the ability to exercise significant influence. Equity method investments are measured at cost minus impairment, if any, plus or minus our share of equity method investee income or loss.

Variable interest entities –The Company determines at the inception of each arrangement whether an entity in which it has made an investment or in which the Company has other variable interests is considered a variable interest entity (“VIE”). The Company consolidates VIEs when it is the primary beneficiary. The Company is the primary beneficiary of a VIE when it has the power to direct activities that most significantly affect the economic performance of the VIE and has the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. If the Company is not the primary beneficiary of a VIE, the Company accounts for the investment or other variable interests in a VIE in accordance with applicable GAAP. The Company will reassess whether they are the primary beneficiary at each reporting date.

Income taxes – Income taxes are accounted for using an asset and liability approach whereby deferred tax assets and liabilities are recorded for differences in the financial reporting bases and tax bases of our assets and liabilities. If it is more likely than not that some portion of deferred tax assets will not be realized, a valuation allowance is recorded.

GAAP prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Tax positions shall initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions shall initially and subsequently be measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and all relevant facts. All deferred income taxes are classified as noncurrent assets or noncurrent liabilities on the consolidated balance sheet as of December 31, 2025 and 2024, respectively.

Research and development costs – Internally-developed research and development costs are expensed as incurred. Acquired in-process research and development (“IPR&D”) is capitalized as an indefinite-lived intangible asset and evaluated periodically for impairment. When the project is completed, an expected life is determined and the IPR&D is amortized as an expense over the expected life.

Shipping and handling costs – Shipping and handling costs for products shipped to customers, which are included in selling, general and administrative expenses, were approximately $20.3 million, $18.0 million, and $20.8 million for the twelve months ended December 31, 2025, 2024, and 2023, respectively.

Concentration of credit risk – Financial instruments, which potentially subject us to concentrations of credit risk, include trade accounts receivable. Credit risk is limited by the dispersion of our customers over various geographic areas, operating primarily in electronics manufacturing and distribution. We perform a credit evaluation of new customers and monitor the accounts receivable aging of our existing customers. Generally we require no collateral from our customers and historically credit losses have been insignificant.

We currently maintain substantially all of our day-to-day cash balances and short-term investments with major financial institutions. Cash balances are usually in excess of Federal and/or foreign deposit insurance limits.

Valuation of financial instruments – The carrying value of our financial instruments, including cash and cash equivalents, short-term investments, accounts receivable, accounts payable, credit line, and long-term debt approximate fair value due to their current market conditions, maturity dates, and other factors.

Share-based compensation – Restricted stock grants are measured based on the fair market value of the underlying stock on the date of grant and compensation expense is recognized on a straight-line basis over the requisite four-year service period. Performance stock units are measured based on the fair market value of the underlying stock on the date of grant and compensation expense is recognized over the three-year performance period, with adjustments made to the expense to recognize the probable payout percentage.

We use the Black-Scholes-Merton model to determine the fair value of stock options on the date of grant and recognize compensation expense for stock options on a straight-line basis. The amount of compensation expense recognized using the Black-Scholes-Merton model requires us to exercise judgment and make assumptions relating to the factors that determine the fair value of our stock option grants. The fair value calculated by this model is a function of several factors, including the grant price, the expected future volatility, the expected term of the option and the risk-free interest rate of the option. The expected term and expected future volatility of the options require judgment. In addition, we estimate the expected forfeiture rate and only recognize expense for those stock options expected to vest. We estimate the forfeiture rate based on historical experience, and to the extent our actual forfeiture rate is different from our estimate, share-based compensation expense is adjusted accordingly.

Treasury stock – In May 2025, the Company’s Board of Directors authorized the repurchase of up to an aggregate of $100 million of its outstanding common stock, $0.66 2/3 par value per share. The share repurchase program will expire on December 31, 2030, unless extended or shortened by the Board of Directors. As of December 31, 2025, the Company has repurchased approximately $33.8 million of its common stock. Shares that are reacquired are recorded as treasury stock, at cost, the measurement date of cost being date of purchase, as a reduction to stockholder’ equity.

Functional currencies and foreign currency translation – We translate the assets and liabilities of our non-U.S. dollar functional currency subsidiaries into U.S. dollars using exchange rates on the balance sheet date. Net sales and expense for these subsidiaries are translated at the weighted-average exchange rate during the period presented. Resulting translation adjustments are recorded as a separate component of accumulated other comprehensive income or loss within stockholders’ equity in the consolidated balance sheets.

Defined benefit plan – We maintain plans covering certain of our employees in the U.K. The overfunded or underfunded status of pension and postretirement benefit plans are recognized on the balance sheet. Actuarial gains and losses, and prior service costs or credits, are recognized in other comprehensive income (loss), net of tax effects, until they are amortized as a component of net periodic benefit cost. For financial reporting purposes, the net pension and supplemental retirement benefit obligations and the related periodic pension costs are calculated based upon, among other things, assumptions of the discount rate for plan obligations, estimated return on pension plan assets and mortality rates. These obligations and related periodic costs are measured using actuarial techniques and assumptions. The projected unit credit method is the actuarial cost method used to compute the pension liabilities and related expenses. The expected long-term return on plan assets was determined based on historical and expected future returns of the various asset classes. The plan’s investment policy includes a mandate to diversify assets and invest in a variety of asset classes to achieve its expected long-term return and is currently invested in a variety of funds representing most standard equity and debt security classes. Trustees of the plan may make changes at any time.

Noncontrolling interest – Noncontrolling interest primarily relates to the minority investors’ share of the earnings of certain China and Taiwan subsidiaries. Noncontrolling interests are a separate component of equity and not a liability. Increases or decreases in noncontrolling interest, due to changes in our ownership interest of the subsidiaries that leave control intact, are recorded as equity transactions. The noncontrolling interest in our subsidiaries and their equity balances are reported separately in the consolidated financial statements, and activities of these subsidiaries are included therein.

Contingencies – From time to time, we may be involved in a variety of legal matters that arise in the normal course of business. Based on information available, we evaluate the likelihood of potential outcomes. We record and disclose the appropriate liability when the amount is deemed probable and reasonably estimable. In addition, we do not accrue for estimated legal fees and other directly related costs as they are expensed as incurred.

Comprehensive income (loss) – GAAP generally requires that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities are reported as separate components of the equity section of the consolidated balance sheet, such items, along with net income, are components of comprehensive income or loss. The components of accumulated other comprehensive income or loss include foreign currency translation adjustments and unrealized gain or loss on defined benefit plan.

The components and balance of comprehensive income is as follows:

Change in Accounting Estimate – On an on-going basis, the Company evaluates inventory for a number of risk factors in the determination of net realizable value via the salability and obsolescence (“S&O”) reserve. Those risk factors include inventory aging, salability, excess inventory, shelf life, customer risk, and other risks. These factors are quantified separately via analysis of sales levels, sales projections, purchases by item, as well as raw material usage related to the Company’s manufacturing facilities, etc. and are aggregated into a single S&O reserve that is applied to the overall inventory balance to recognize that inventory at the lower of its cost or net realizable value.

In the fourth quarter of 2024, the Company completed a product obsolescence study related to its inventory. Based on the results of this study the Company increased the shelf life of certain of its products, resulting in a change in accounting estimate. This change was effective December 31, 2024 and resulted in a decrease of approximately $4.5 million in cost of goods sold and an increase in net income of approximately $3.8 million, or $0.08 per basic and diluted share, reflected in the Company’s Consolidated Statements of Income for the twelve months ended December, 31, 2024.

In the fourth quarter of 2024, after completing its total inventory reserve analysis, including all inventory risk factors, including but not limited to the product shelf life, the Company’s total inventory reserve increased approximately $5.6 million and is reflected in cost of goods sold in the Company’s Consolidated Statements of Income for the twelve months ended December 31, 2024.

Recently Issued Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) issued the following Accounting Standards Updates (“ASU”) which could have potential impact to the Company’s financial statements:

In December 2025 the FASB issued ASU 2025-10, “Government Grants (Topic 832) Accounting for Government Grants Received by Business Entities (“ASU 2025-10”). ASU 2025-10 establishes authoritative guidance on the accounting for government grants received by business entities. The amendments in ASU 2025-10 require that a government grant received by a business entity should not be recognized until:

It is probable that (a) a business entity will comply with the conditions attached to the grant and (b) the grant will be received.

A business entity meets the recognition guidance for a grant related to an asset or a grant related to income.

The amendments in this Update require that a grant related to an asset be recognized on the balance sheet as a business entity incurs the related costs for which the grant is intended to compensate, either as:

Deferred income (the deferred income approach)

An adjustment to the cost basis in determining the carrying amount of the asset (the cost accumulation approach).

For public business entities, the amendments in this Update are effective for annual reporting periods beginning after December 15, 2028, and interim reporting periods within those annual reporting periods. The Company is currently evaluating the impact this amended guidance may have on its financial statements.

In July 2025, the FASB issued ASU 2025-05, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets” (“ASU 2025-05”). ASU 2025-05 provides a practical expedient that all entities can use when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606, Revenue from Contracts with Customers. Under this practical expedient, an entity is allowed to assume that the current conditions it has applied in determining credit loss allowances for current accounts receivable and current contract assets remain unchanged for the remaining life of those assets. ASU 2025-05 is effective for fiscal years beginning after December 15, 2025, and interim reporting periods in those years. Entities that elect the practical expedient and, if applicable, make the accounting policy election are required to apply the amendments prospectively. The Company does not expect this amended guidance will have a material impact on its financial statements.

In May 2025, the FASB issued ASU 2025-03, “Business Combination and Consolidation: Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity” (“ASU 2025-03”). ASU 2025-03 provides clarifying guidance on determining the

accounting acquirer in certain transactions involving VIEs. The update aims to improve consistency and comparability in financial reporting, especially when companies merge with a special-purpose acquisition company (“SPAC”). ASU 2025-03 requires entities to apply the same factors used for determining the accounting acquirer in other acquisition transactions. Essentially, it aims to make financial reporting more comparable and decision-useful for investors by ensuring that the accounting acquirer is appropriately identified in acquisitions of VIEs, particularly in SPAC transactions. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026 including interim periods within those annual periods, with early adoption permitted. The Company is currently evaluating the impact this amended guidance may have on its financial statements.

In November 2024, the Financial Accounting Standards Board issued Accounting Standards Update 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40). The amendments in this update require that at each interim and annual reporting period an entity disclose:

•

The amounts of purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depreciation, depletion, and amortization recognized as part of oil and gas-producing activities (or other amounts of depletion expense) included in each relevant expense caption. A relevant expense caption is an expense caption presented on the face of the income statement within continuing operations that contains any of the expense categories listed above;

•

Companies are also required to include certain amounts that are already required to be disclosed under current generally accepted accounting principles in the same disclosure as the other disaggregation requirements;

•

Disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively; and

•

Disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses.

The amendments in this update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact this amended guidance may have on its financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this update require that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate). For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2024. The Company adopted the new standard and the additional disclosure requirements with retrospective application are contained in Note 12 - Income Taxes- Effective Rate Reconciliation.

Note 2 – Earnings per Share

Basic earnings per share is calculated by dividing net earnings attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is calculated similarly but includes potential dilution from the exercise of stock options and stock awards, except when the effect would be anti-dilutive. Earnings per share are computed using the “treasury stock method.”

Twelve Months Ended December 31,

Earnings (numerator)

Shares (denominator)

Dilutive effect of stock options and stock awards outstanding 74 200 508

Earnings per share attributable to common stockholders

Note 3 – Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

We use valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement costs). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. These two types of inputs create a three-tier fair value hierarchy that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (for example, interest rates, volatilities, prepayment speeds, loss severities, credit risks and default rates) or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 Inputs - Significant unobservable inputs that reflect an entity’s own assumptions that market participants would use in pricing the assets or liabilities.

As of December 31, 2025, we had short-term and long-term investments. Long-term investments are included with Other long-term assets on the consolidated balance sheet. Trading securities held at December 31, 2025, were purchased on the open market and unrealized gains and losses are included in Other income (expense). The trading securities are valued under the fair value hierarchy using Level 1 Inputs. Short-term investments consist of investments such as time deposits, which are highly liquid with maturity dates greater than three months at the date of purchase. Generally, we can access these short-term investments in a relatively short amount of time but in doing so we generally forfeit a portion of earned and future interest income. Long-term investments consist of certain equity securities acquired as part of the LSC acquisition. Deferred compensation investments consist primarily of life insurance policies, but may also include investments in the Company’s stock, mutual funds and cash. See Note 13 for additional information related to our deferred compensation program and Note 18 for additional information related to our interest rate swaps and foreign currency hedges. The short-term investments, long-term investments and deferred compensation investments are valued under the fair value hierarchy using Level 1 and Level 2 Inputs.

Financial assets and liabilities carried at fair value as of December 31, 2025, are classified in the following table:

Short-term investments $ 9,817 $ 9,817 $ - $ - $ -

Collard forward liability (2,558 ) - (2,558 ) - -

DIOD US Equity

DIOD · 10-K · period ended 2025-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures.

Item 9B. Other Information.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Item 10. Directors, Executive Officers, and Corporate Governance.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13. Certain Relationships, Related Transactions, and Director Independence.

Item 14. Principal Accountant Fees and Services.

Item 15. Exhibits, Financial Statement Schedules.

Item 16. Form 10-K Summary.

DIOD US Equity☆

DIOD · 10-K · period ended 2025-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures.

Item 9B. Other Information.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Item 10. Directors, Executive Officers, and Corporate Governance.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13. Certain Relationships, Related Transactions, and Director Independence.

Item 14. Principal Accountant Fees and Services.

Item 15. Exhibits, Financial Statement Schedules.

Item 16. Form 10-K Summary.

DIOD US Equity